Kentucky Not Alone With Its Budget Problems

FRANKFORT, Ky. (AP) - As Kentucky faces a projected revenueshortfall of nearly $1 billion over the next two fiscal years, thestate is not alone in the nation when it comes to grappling withsagging revenues and increasing budgetary needs.

Kentucky is among states across the country that are facingtough budget decisions this year, according to a review by TheAssociated Press. Nearly two dozen states are facing shortfallsthat combined total more than $34 billion, the AP review found.

"Nearly all the states are having problems, and the ones thataren't are getting ready to have problems because of the downturnin the national economy," said House Speaker Jody Richards,D-Bowling Green. "This is not unique to Kentucky in any way."

Kentucky is facing a projected budget shortfall of approximately$900 million over the next two fiscal years beginning July 1.That's about $580 million in fiscal 2009 and about $300 million in2010.

Lawmakers in Kentucky are pondering various options, includingraising the state's tax on cigarettes and significant cuts tohigher education funding. Gov. Steve Beshear has proposed atwo-year spending plan that calls for 12 percent cuts to publicuniversities and multiple government programs and agencies.

Beshear has proposed an austere two-year $18.5 billion spendingplan that includes significant cuts to state agencies and publicuniversities. Kentucky's current two-year budget is about $18.1billion.

But Beshear has said that cuts to higher education and otherareas of state government were needed to offset unavoidable hikesin "have to" areas such as Medicaid and the state's prisonsystem.

Beshear has already ordered 3 percent spending cuts to stategovernment and public universities in an effort to resolve thecurrent fiscal year's $434 million budget shortfall. Beshearattributed the current year fiscal problems to less income than wasconsidered in the budget, additional spending that was authorizedby the General Assembly since the budget was passed and additionalspending needs in programs such as Medicaid and the state's prisonsystem.

A group of Kentucky economists, known as the ConsensusForecasting Group, predicts shrinking revenue from various sources,including corporate and individual income taxes and sales taxes.

Now Kentucky lawmakers are considering ways to increase revenue.

Beshear is pushing a proposal to legalize casino gambling, whichhe says could bring at least $500 million in license fees by nextyear and $600 million in new revenue in future years.

The Kentucky House last week approved a budget proposal thatcalled for an increase in the cigarette tax of 25 cents per pack.Beshear wants lawmakers to pass a 70-cent cigarette tax increaseand use the revenue to generate up to $800 million in new revenuethrough bonds.

Beshear, who has opposed raising such taxes, said he believedthe proposed cuts to state government would be too severe.

Senate President David Williams, however, said there is "verylittle if any sentiment" for raising taxes. The state is in"tough economic times," and there will likely be "some cuts,"Williams said.

"I never have believed, and do not believe, that we are in afiscal crisis," Williams said.

Nevertheless, Kentucky's Medicaid program would likely fallshort at least $360 million over the next two fiscal years underBeshear's proposed budget, Health and Family Services SecretaryJanie Miller recently told a legislative panel.

Under the House-approved plan, Kentucky would also refinanceGeneral Fund debt, and other services would be taxed under theproposal. Public-school teachers, however, would see a pay increaseof 4 percent over the next two years under the proposal.

Along with the cigarette tax increase, the House revenue packagecounts on revenue from higher taxes on other tobacco products and avariety of business services to generate an additional $95 million.Revenue from the taxes coupled with cost-saving provisions wouldgenerate some $800 million over the next two years. One of thelargest of those provisions calls for restructuring and refinancingGeneral Fund debts to save about $300 million over two years.

Williams said he did not agree with the House's proposal, whichis pending in the Senate.

"I think that that's not responsible," Williams said of theHouse plan.

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